THE Bangko Sentral ng Pilipinas (BSP) could become more aggressive in raising key interest rates as most economists are less confident that inflation will return to target over the next one to two years.
Results from the central bank’s June 2026 Survey of External Forecasters (BSEF) showed that almost all private sector economists expect an increase of up to 175 basis points this year before easing in 2027 as inflation gradually moderates.
“Respondents became less confident that inflation would settle near the BSP’s 3.0‑percent target over the next one to two years,” the central bank said.
The findings underscore market expectations that the central bank will maintain a tight monetary policy stance to rein in inflation, which has accelerated in recent months amid the spillover effects of the war in the Middle East and the resulting surge in global energy prices.
Inflation is projected to average 6.0 percent over the next 12 months, before easing to 4.1 percent over the next 24 months and 3.4 percent over the next 36 months.
While the three-year forecast falls within the BSP’s 2.0- to 4.0-percent target range, it remains above the 3.0-percent midpoint.
Compared with the previous month’s survey, the 12-month inflation forecast remained unchanged while the 24-month projection eased slightly from 4.2 percent. The 36-month outlook edged down from 3.5 percent.
Despite the modest improvement in the medium- and long-term forecasts, respondents were less optimistic that inflation would return to the BSP’s target over the next two years.
Survey respondents assigned a lower probability to inflation settling close to 3.0 percent over the 12- and 24-month horizons, indicating weaker confidence that price pressures would ease as quickly as previously expected.
Confidence, however, improved over the 36-month horizon, suggesting that longer-term inflation expectations remain anchored and that inflation is still expected to gradually move toward the target.
“The spillover effects of the conflict in the Middle East and elevated global oil prices on food prices, transport fares, and core inflation are the likely sources of inflation pressures in the near term,” the economists said.
“The potential impact of a super El Niño episode and typhoons may also put upward pressure on food prices,” they added.
“Meanwhile, weaker domestic demand could temper inflation.”
Bank of the Philippine Islands (BPI) lead economist Emilio Neri noted while headline inflation eased to 6.4 percent last month, core inflation remained elevated.
“While headline inflation has slowed, core inflation continues to trend higher, indicating that price increases are becoming more widespread beyond food and energy,” he said.
Neri said that inflation only cooled due to a decline in global oil prices and stressed that risks remained tilted to the “upside and inflation is likely to stay elevated for the rest of the year.”
“The possibility of a super El Niño poses a key threat, as severe weather tends to reduce agricultural output and drive food prices higher,” he added.
“Additional rate hikes could temper economic activity, but the adverse effects of elevated inflation may be more detrimental to growth.”
